Well, I know this talk's been coming.  January 5th this year was the first spot of discussion the Canadian Government sparked over considering the reduction of mortgage amortizations and raising the dowpayment amount required to purchase a home.  They sited concerns over whether a consumer would be able to handle the mortgage they take on today (at low rates) down the road when higher rates will result in higher payments, etc - a good point.  I've been trying take this into consideration when placing someone in a term - looking at when renewal lands and what is expected for that time frame; or what a variable means to someone's payment and overall affordability when rates (and therfore payments) increase.  This would apply to not only mortgages, but also to any line of credit or credit facility someone has with a floating rate - quite alot to think about really.

 

In any case, have a read below, and stay tuned for details.  If these adjustments take place, this will change the homebuying process as we know it.

 

Have a great long weekend, and enjoy both Family Day and Valentine's Day!  We'll touch in next week!

 

Kind Regards,

 

Sarah

 

 

OTTAWA (Reuters) - The Canadian government is looking at tightening up rules for granting mortgages to make sure consumers don't take on more debt than they can handle, the Globe and Mail newspaper reported on Thursday.

The report, which cited unnamed sources, said the principal proposal was to require banks to consider whether a person who takes out a variable-rate mortgage can continue to make payments if interest rates were to go up significantly.

The newspaper said there is a fear that many of the borrowers who are buying homes because of unusually low mortgage rates will struggle when rates rise, which could have a dampening effect on the broader economy.

As the housing market continues to heat up, some economists have warned of a possible housing bubble, fueled in part by the Bank of Canada's pledge to keep its benchmark interest rate at rock bottom until mid-year.

Finance Minister Jim Flaherty said on the weekend there was no evidence yet that home buyers were taking on unsustainable levels of debt, but that he stood ready to tighten insurance rules for riskier mortgages if necessary.

Former Bank of Canada Governor David Dodge suggested in a television interview on Wednesday that the federal housing agency, Canada Mortgage and Housing Corporation, should look carefully at the current terms for insuring mortgages.

But the report said that after studying the potential impact of requiring higher down payments and shorter amortizations, the finance minister believes that such moves would take too much heat out of the market and damage the economic recovery.

(Reporting by Randall Palmer; Editing by Jeffrey Hodgson)